What is Digital Transformation and Why Are Top Companies Adopting It

Digital Transformation is a discipline with some years already, that seeks to profoundly, radically and quickly transform companies that have entered the 21st century with the mentality, processes and legacy systems of the twentieth century.

The real risk of innovation is not doing it

It is an intelligent, proactive, methodical and integral response that seeks to respond to the challenges presented by the hyper-economy exponentially enhanced by the digital revolution that the planet lives as one of the fundamental components of the Fourth Industrial Revolution.

This new reality can be a great threat to companies and countries that have been stuck on a world vision anchored in the last century without noticing that everything in their environment has changed and will continue to change at an ever faster pace. It is also a hyper-culture that transforms businesses from the inside out. Some companies are making an enormous effort of adaptation while the more audacious, agile and visionary are protagonists of the change leading the digital revolution.

This revolution is already considered “the greatest revolution in the history of mankind” or what the World Economic Forum named in Davos, Switzerland, on January 23, 2016, as the Fourth Industrial Revolution.

We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before.

World Economic Forum

As a response to this great technological, human and scientific revolution, the Digital Transformation discipline has been developed, for that is exactly what it is about: A discipline with different transformational frameworks (depending on the consultant with whom you end up working). It is based, in my view, on the following basic points:

1. Study and understand in depth what the Fourth Industrial Revolution consists of and how the digital hyper-economy (a subcomponent of the Fourth Industrial Revolution) can positively or negatively impact its companies, its environment, its business model and even and above all the economy In which they operate.

2. Fully understand what is happening in the world and in our environment. Studying a lot, hiring a consulting firm specializing in the subject, accelerating the transformation and sending our corporate leaders to attend various training programs in the field, particularly those taught in Silicon Valley like Singularity University.

3. How do they understand that this REVOLUTION is changing everything: The way we relate, work, study, inform, have fun, make decisions and learn, generate value and make the planet a better place to live, among many others.

4. Learn to unlearn. The most difficult thing to achieve is to change the mindset of the management layer and the board of directors. This fixation with their way of seeing the world is something arrogant, fed on their past successes. It is based on a culture that has stopped learning from its environment, reading the trends, and is comfortable within its comfort zone and happy growing at arithmetic rates when it could be doing so at exponential rates. The first step to learn is to know that you do not know.

“What brought you here won´t get you there”

5. Learn how companies that are rising thanks to this wave (or rather Tsunami) are achieving competitive advantages and brutal growths, unimaginable just 10 years ago, with exponential growth and stock valuations previously inconceivable.

6. How these hyper-competent and hyper-competitive companies move quickly and unobtrusively from their comfort zone and boldly challenge the status quo, learn, share knowledge and radically transform or even reinvent themselves.

7. These companies start by creating innovation centers (Corporate Innovation Centers) that group together intrapreneurs with entrepreneurs to develop and implement think tanks that start by questioning everything, to train themselves, to incorporate frameworks of innovation like design thinking, Scrum or social enterprise acting as great accelerators of the firm’s innovation process.

“From another point of view, we could call this revolution “The Seventh Mass Extinction of Planet Earth”, only that in this case thousands or millions of companies will be extinguished that could not adapt in time and in form to this mega tectonic shift”

Above all, the lack of awareness and knowledge at the corporate leadership levels and directories, the lack of sense of urgency and the imperative of business continuity under a “business as usual” model, is the perfect route to fall of the cliff.

This lack of vision, awareness, and consequence with the times in which we live in and the lack of a sense of urgency, is destroying value from these old fashioned kind of companies and freeing much of the global territory to these entrepreneurs, startups, unicorns, innovation hubs and Network Orchestrators, who understand, respect and even draft the rules of how the world works in the first two decades of the twenty-first century.

They move at high speed, they attract disruptive talent, and they understand and move in compliance with the rules of the Fourth Industrial Revolution and therefore they are inserted as active protagonists of the digital hyper-economy that is ruling the planet.

“52% of Fortune 500 companies have been merged, bought or broken since 2000”

And what can or should companies do about it?

1. Accept once and for all that we are already in the Fourth Industrial Revolution, in the new digital economy, and that these may be the greatest opportunity for exponential growth for their companies or the biggest threat they have ever faced.

2. Search inside and outside your company for professionals and consultants who are already surfing these hyper-tsunamis and incorporate this knowledge into the company´s DNA, both into the people, the culture and create the proper policies, tactics, and strategies.

3. Develop a hyper-culture. 80% of the valuation of these companies is based on intangibles, fundamentally in exciting cultures, disruptively focused on giving the best conditions to the talent they develop, collaborate and nourish, thus encouraging the innovation to arise spontaneously from any part of the company and recognizing and rewarding it publicly.

How do we generate a hyper-culture, that feeds of the digital revolution, that dances to its rhythm and preferably faster, where going to work not only is pleasant but exciting, and finally, where this culture is supported by cutting edge technology in both the front and the backend.

4. Digital Transformation is 80% culture and 20% technology and not the other way around. It’s not just about buying more hardware and software. The real challenge is to transform the corporate culture from the hierarchical levels to a more plain business pyramid so that each person “lives” this culture and collaborate reciprocally independently of the corporate ranks.

5. Grow inorganically, try not to invent the wheel. The best shortcut to skip stages is to analyze which startups are appetizing or already have a certain level of development and acceptance and invest in them quickly before they are absorbed by their competition.

6. Everybody in the company, from the board of directors to the C-suite, to the managers and even reaching the last employee of the company, must understand in depth that we have changed of age and that now new rules govern the game.

7. That this revolution will generate radical, deep and even threatening changes in our whole environment and that either we adapt very quickly to these new rules or face bankruptcy with the same speed.

8. These new rules of the game are forcing, companies to question everything, including and especially the most solid foundations on which their business models are based and which ironically have made their companies successful for the past years. The main and the biggest victims of this Revolution are the business models that remained anchored in a millennium that´s already gone.

9. That arrogance + ignorance = Irrelevance. This is what happens when one exposes these issues to boards of directors or managements whose previous successes have made them arrogant (they always ask “Why are we going to change if we have succeeded so far doing the same thing for decades?”) And they ignore that at all around them is occurring the greatest revolution in the history of mankind.

It is necessary to fully transform companies, first to survive the challenges and disruptions presented by the ultra-competitive digital economy of the 21st century and then, innovate so that they can thrive and take advantage of all the benefits of this new hyper-techno-economy, and why not? Disrupt their own industries.

As I have already mentioned in several previous articles, the biggest threat facing companies is a super interesting concept that coined a few years ago the great Brian Solis, who studies the impact of innovation on business and society which he calls very appropriately: “Digital Darwinism”:

“A state of business failure where technology and society move faster than the company’s ability to adapt or lead”